July 27 (Bloomberg) -- South Africa’s central bank Governor
Gill Marcus said “further monetary easing is not automatic”
after surprising economists by lowering interest rates last week
to spur the economy.

“There has been much speculation as to whether this was a
beginning of a renewed interest rate easing cycle,” Marcus said
at the bank’s annual general meeting in Pretoria today. “This
interest rate reduction should, however, be seen as part of the
continued monetary policy response to the crisis that began in
2008.”

The Reserve Bank on July 19 cut its key interest rate by
half a percentage point to 5 percent, the first reduction since
November 2010, after inflation eased into the bank’s target
range while the economy faltered. The debt crisis in Europe,
which buys about a third of South Africa’s manufactured goods,
is threatening the growth outlook, Marcus said.

Investors have increased bets Marcus will lower the
benchmark rate again before the end of the year. Yields on
forward-rate agreements due in December dropped 51 basis points,
or 0.51 percentage point, in the past month to 4.74 percent at
11:49 a.m. in Johannesburg.

“Further monetary easing is not automatic and will be
highly dependent on global and domestic developments,” Marcus
said.

Marcus said the bank’s economic growth forecast of 2.7
percent for this year was partly based on the assumption that
European leaders would make the “appropriate policy
responses.” At the same time, the bank “needs to remain
vigilant to inflation and financial stability risks.”

The rand was little changed at 8.2659 per dollar at 2:07
p.m. in Johannesburg. The yield on the rand bond due in 2021
dropped 1 basis point to 6.55 percent.